India’s RBI prevents industrial firms from setting up banks

The Reserve Bank of India said large industrial companies will only be allowed to invest up to 10 percent in banks, and thus, will not be allowed to set up lenders, according to final guidelines for banking licenses issued on Monday.

The non-financial businesses of any entity becoming a major stakeholder in banks will not be able to exceed 40 percent of its total assets, the RBI also said. (PTI)

The Reserve Bank of India said large industrial companies will only be allowed to invest up to 10 percent in banks, and thus, will not be allowed to set up lenders, according to final guidelines for banking licenses issued on Monday.

Only entities with total assets of at least 50 billion rupees ($749.63 million) will be allowed to become major stakeholders in banks, the RBI added in the statement.

The non-financial businesses of any entity becoming a major stakeholder in banks will not be able to exceed 40 percent of its total assets, the RBI also said.

The final guidelines hew closely to the draft rules it had issued in May as the central bank seeks to encourage the entry of more lenders in a country where only about half the population have access to formal financial services.